Since the early 1980's almost all lenders nationwide have required title insurance as a prerequisite to accepting mortgages on residential and commercial real estate. Although title insurance companies have been writing such insurance since the late 1800's its popularity has grown with the onset of secondary market mortgages. These are mortgages which are originated locally and sold nationally to investors in the same way that bonds and other securities are sold. Real estate title insurance very simply is an insured statement of the conditions of one's title or ownership rights to a certain piece of real estate. The policy guarantees that the property being purchased or mortgaged is free from undisclosed liens or rights and it guarantees additionally that any confusion as to rights of ownership will be resolved in favor of the party owning the real estate or the company will refund the policy limits to the policy holder.
A party purchasing real estate is always offered the opportunity to purchase an Owner's Policy of Title Insurance by the party conducting the real estate closing. For example, you decide to purchase a house in Boston and are obtaining a mortgage to help you finance the purchase from a bank or mortgage company. The lending institution will require an attorney or title agent to research the title to the property and issue them a Lenderıs Policy of Title Insurance. This assures to the lender that the property is or will be owned by the purchaser, and that no defects, liens or encumbrances exist on the property that would adversely affect the marketability of the title. Furthermore, the lenderıs policy guarantees that the mortgage will be recorded properly and secures the property for the repayment of the loan. Since the closing attorney is already issuing a lenderıs policy of title insurance the buyer has the opportunity at that time to obtain an ownerıs policy of title insurance at a cost substantially less than the buyer would pay if the policy was not written simultaneously with the lenderıs policy.
The ownerıs policy of title insurance insures that the owner has good and marketable title to the property - free from any encumbrances or liens that would adversely affect the property with the exception of defects or liens made known to the buyer, and insures to the owner that if any such liens, encumbrances, defects or other title problems become known, the title insurer will defend the buyerıs title to the property.
In many instances we are asked whether or not title insurance is necessary or advisable for the owner to purchase. We recommend the purchase of the title insurance for a few simple reasons. First, the premium for purchase of the title insurance policy is a one time charge. Since the purchaser is usually borrowing money to finance the purchase of the property, the majority of the cost of the title insurance policy has been paid for by the premiums of the lender's policy which is required by the loan. Usually for a few hundred dollars or less the owner can insure against a variety of problems which could occur in the future as relates to his property. These items include forged documents in the chain of title, signatures of mentally incompetent persons or minors which are unknown to the party reviewing the title, mistakes or inaccuracies in recording of legal documents of title, undisclosed or missing heirs, fraud in the execution or in the handling of a transaction in the prior chain of title, invalid divorces or misrepresentation of marital status of the parties signing the documents, unpaid taxes which were not paid prior to the purchase of the property, and most importantly clerical errors in the public records and claims of parties unknown because their claims have not been filed in any indices of public record. These are just a few of the issues which can arise in the title to anyone's real estate.
Our office has seen defects in titles which could not be revealed by examination of the public records. These defects arise at a time after the transaction has taken place and often purchasers suffer significant losses as a result of them. That is why ownerıs title insurance makes a great deal of sense. Title insurance, like any other insurance, protects against the eventuality of an unforeseen and an unfortunate circumstance. |